LOMBARD, Ill. -
Sure, CU members still tend to be more loyal than bank customers according to a variety of surveys, but as Bill Handel, VP-product development at Raddon Financial Group pointed out, credit unions have seen decreasing loyalty among their members, and that's being reflected in other industry trends, most notably stagnant growth rates overall.
The key, Handel suggested, is giving members more reason to be loyal, and he'll be sharing strategies to do just that at Credit Union Journal's 8th Annual Business Development & SEG Conference, April 12-13 in Boston.
While Handel recognizes the validity of survey after survey stating that loyalty to credit unions is always higher than banks, he said the explosion of bank branches, improved bank practices and internet banking is pulling consumers in many directions. "Our contention is that loyalty is less than in the past," Handel said. "It's easier to not be loyal."
Remember the term "banker's hours?" As late as the 1980s, many banks would open after consumers went to work and closed before they came home. Not anymore. Banks are open longer, on weekends, in retail stores, and Bank of America seems bent on placing a branch on every corner of the nation. Handel cited Wachovia as being the commercial bank finishing No. 1 in service quality and bank executives aren't shy about telling the public.
"They use that pretty aggressively. They never talked about it in the past. Whether or not they are achieving it is a moot point. It's there," Handel said.
Handel said that measuring loyalty while performing member research is a relatively new task and that Raddon Financial is examining it in "a new level of detail." Most credit unions have adopted a "Net Promoter" concept where members are asked "Would you recommend the credit union to a friend or relative?" Handel said such research isn't enough and doesn't take into account the combined effect of convenience, price and service quality that all consumers wrestle with when choosing a financial institution. Most importantly, it doesn't touch on the most significant change in the credit union industry: the shift to community charters. "It's such a large issue, it changes the fundamental structure," Handel said.
Handel said nearly half of credit unions with assets greater than $100 million now have community charters. The big shift to community charters has made it harder to keep a CU's original membership and maintain the same level of affinity while chasing after new members, he said. Handel said many CUs just assumed they could hang out the community charter shingle and new members would flood into their branches.
"Well, that didn't happen," he said.
With community charters, Handel said branch building followed close behind, creating the single largest, and new, expense for credit unions. As CU staff become more occupied with new branches, members and business loans, for example, the loyalty of the original membership can be tested, blurred or potentially erased.
"If they're not paying attention then their model is changed and they don't realize it," he said. "You lose that affinity."
This April at the Boston conference, Handel will teach attendees the impact of these issues on overall CU performance, how it's affecting core deposits, household retention and how CUs can shine more light on its member loyalty.
